Marine fish farming - a disaster area?

by GUSTAV-ERIK BLAALID, EDITOR gustav@fishfarmingxpert.com

Salmon farming has been a great commercial success since its beginning in the 1970s. Total world production is now around 2.5 million tonnes of salmonids in aquaculture annually. In Norway alone, the volume has passed 1 million tons.

It would be natural to assume that success like this would lead producers to farming other cold- water species. The technology in use is strikingly similar, the environment is strikingly similar, and the infrastructure is already established. Salmon has paved the way. Still, the major salmon producers are very cautious. Of the major salmon companies only Marine Harvest and Aqua Chile are breeding species other than salmonids. Marine Harvest has a modest investment in halibut, while Aqua Chile has a more extensive commitment to the farming of tilapia. Beyond this, it appears that salmon farmers have come to terms with the fact that diversification in farming would be disruptive to the adventurous profits the salmon industry has had in recent years, and which seems to persist in the coming years. The major initiatives on marine species are a thing of the past. In Norway over one billion NOK in fresh capital were raised for the farming of cod. Most failed, and now there are only a handful of players left. Earlier on there were many who opted for halibut, now only 2-3 are left. Turbot has become an industry in Spain, where Stolt Sea Farm is the largest actor; an actor who built up capital with salmon, but sold this business to Marine Harvest and continued with marine species. The major initiatives on marine aquaculture in Norway occurred in a period when the profits of the salmon industry were at a significantly lower level than today.

Certainly a paradox, but also an example of extremely short-term perspectives being decisive. We believe, unfortunately, that if one of the big companies in the salmon industry would signal an increased focus on marine species, this would be perceived negatively by analysts. If the analyst corps is negative, it affects the stock price. The result would be that the owners would suffer losses of hundreds of millions of NOK. And nobody likes that. The dynamics are to deliver ever more of the same for the shares to continue rising in value. Analysts have no variables to measure whether a company is well equipped for the future, their strategic position, their robustness, their economic and strategic sustainability. The dynamics of more of the same captures owners in a way that leads them to remain at their position.

All regions where farmed salmon is produced share comparative competitive advantages. There are not too many other regions in the world where salmon can be produced in the same, effective and affordable way. These comparative advantages also apply to other species. We believe there are few who can help develop new aquaculture species, other than the established salmon companies. Precisely for reasons already mentioned: They possess a high degree of aquaculture expertise, they are familiar with the technology and they have the financial muscle to develop new species.

This is not just a matter for private companies, but also for public authorities. It must be in the public interest to use the coast and develop sustainable industries that are rooted precisely in what is considered as comparative advantage.